PANC 2016: Advice and Robo Advisers

In moderating a PLANADVISER National Conference panel discussion
on robo-advisers, Jeb Graham, retirement plan consulting partner with CAPTRUST
Advisors, asked a direct question of the attending advisers: “How big of a
disruption do you expect from robo adviser competition?”

The flash poll showed
most feel robo is only minimal to moderate threat today, and looking out five
years it will be about the same, despite the likely entrance of more and more
technology providers into the traditional financial advisory domain.

According to
panelist Jeffrey Hemker, national sales manager in the retirement division at Invesco,
advisers seem to have grown at least somewhat comfortable with the idea that
robo will be a source of competition. But many advisers are also coming to view
robo in a fundamentally different way, he said, understanding that the best
parts of robo can be folded in to support the traditional adviser.

“If you remember years ago, internet
banking was really something that seemed new and different,” Hemker explained. “You
may even remember the story of Netbank, which was a tech startup that was going
to totally disrupt everything we knew about brick and mortar banking. Well, what’s the case now? The big traditional providers have found their own ways to
embrace digital banking and basically beat the disruptors at their own game.
Netback, for example, has gone out of business while many traditional banks are
thriving thanks in no small part to digital technology.”

Jylanne Dunne, a senior vice president for Fidelity’s
clearing and custody solutions business, agreed wholeheartedly with that
assessment. She observed that, even during this time of major regulatory shifts,
she actually gets far more questions on robo-advice than on any other subject. Many
advisers come to the conversation with serious concern, only to come away with
new ideas about how to make digital advice work for their practices and
clients.

“Our partners come in and they want to know, what does the
rise of robo mean for me?” Dunne said. “Where we start the discussion is by
asking, what problem are you trying to solve? We let them know right from the beginning
that robo-advice can be just as much an opportunity as it is a challenge or
hurdle.”

NEXT: The robo-advice
spectrum is wide

Hemker observed that he has already seen many traditional retirement
adviser and investment firmssuccessfully
embrace different elements of robo—including his own firm, which recently
acquired the robo adviser platform Jemstep.

“We are a great example of how robo can complement the traditional
services of advisers and investment providers,” he suggested. “Jemstep offers
robo adviser service to advisers rather than directly taking over and managing
assets. Previously it had been an online automated investment platform as well,
before shifting gears to offer its software instead.”

Dunne agreed with the sentiment: “One adviser we work with
has recently started bringing in digital planning tools—which many would
classify as robo-advice—to enrollment meetings. It’s an opportunity to create
an interactive, technology-based planning experience right from the start. A
lot of wealth managers are figuring out where they want to be on this spectrum.
At one end it is full self-service, and on the other end the adviser is still
very much front and center, simply leveraging new pieces of technology where
possible.”

Both Hemker and Dunne suggested that finding new successes
via robo-implementation “will always be about leveraging the technology to
support better discussions between clients and advisers.” In other words, there’s
very little reason to think that robo advisers will be able to wholly disrupt
the role of the traditional adviser in the way some seem to want to.

“We believe technology is changing the customer and the
adviser experience for the better,” Dunne concluded. “We will continue to work
with firms to consider their technology and how it’s perceived by clients. The
more successful advisers are on these measures, the better their firm performance
is on average. I think it goes to show we can all coexist together and together
we can create more wealth and reach more investors.”